Franchise tags have become a hot topic in recent years with the emergence of the franchise business and the recent closure of several restaurants.
As of this week, New York City’s franchise tag expiration date has passed with the city’s Chicken McNuggets and Chick-fil-A franchises.
The deadline has become so important for franchisees that the National Chicken Council (NCC) is issuing a report on the franchise tag renewal process.
The NCC recommends that franchisors and owners sign a Franchise Extension Agreement.
This agreement sets forth a timeline for renewing their franchise tags.
However, it also outlines the number of days a franchise can be renewed by franchisor and owner.
Franchisees are required to renew their franchise tag on or before July 1 of each year.
The following is a breakdown of the requirements and deadlines that must be met for a franchise tag to be renewed.
What is a Franchise Agreement?
A franchise agreement is a contract that sets out the terms of the franchisorship and provides for the rights of franchisees.
The agreement must include provisions to ensure that the franchisee has the rights to terminate the franchise.
The requirements to be met to renew a franchise are: An Owner’s Agreement, which must contain the terms and conditions of the owner’s ownership of the business; The franchisee’s written acknowledgement that he or she is the holder of the right to terminate, without prior notice, the franchise; The written acknowledgement of the terms that will be provided in the termination agreement.
This acknowledgement may include a copy of the Franchise Agreement, an amended or new version of the agreement, and a signed termination letter that contains the terms to be provided to the franchiseer.
If a franchisee does not have the required acknowledgement, the owner must notify the NCC by mail.
The franchise owner must also sign the termination letter in writing, which is required if the termination is not in writing.
What are the Requirements to Renew a Franchise Tag?
Franchisees must be able to show that they have met all of the following requirements: The franchise is valid and in good standing, and the franchise has a current gross receipts of $5,000 or less per month for the past three years, for each of the three consecutive years ending June 30, 2021.
A renewal date must be no later than July 1, 2020.
The number of franchisee tags in operation must be at least 10,000.
If the franchise is not currently in operation, the number must be 5,000, and no more than 20,000 tags are in operation.
If there is more than one franchisee, they must be in the same geographical location.
If no tags are current, the next expiration date must not be later than June 30 of each calendar year, unless the franchise owner makes a good faith effort to change the expiration date.
A franchisorian must have a valid business license, which means that they must: Be a citizen of the United States;